Please enter a maximum of 5 recipients. Use ; to separate more than one email address.

Recipient email(s):

Recipient name(s):

Email yourself a copy?

Interview: Masayuki Hirata of NTT DoCoMo

01 July 2008

Competition for NTT DoCoMo has strengthened in its home market of Japan, but the company is cutting costs and focussing more on corporate accounts, says CFO Masayuki Hirata. Meanwhile it has changed its international investment strategy, and is also investing in production companies to create new programming for mobile TV, he tells Alan Burkitt-Gray

Masayuki Hirata: we are trying to produce programming
for DoCoMo customers that is not available from digital
broadcasters

DoCoMo is now part of the GSM Association's LTE
— long-term evolution — strategy. How does
that fit into DoCoMo's own long-term strategy?
Masayuki Hirata: LTE is currently under development.
We believe handsets and services eventually will be developed
and will be on the market from around 2010.
However though the development will be completed around 2010,
the commercialisation of handsets and services is a different
question: we had a hard time as the first commercial operator
in launching wideband CDMA-based 3G.
Therefore in terms of reducing costs for early deployment we
are trying to avoid the situation being repeated again for
super-3G — so we are looking for operators so we can
benefit from a mass procurement of handsets and deployment of
services to keep costs under control.
We are looking at the timing of super-3G with other operators,
which we believe naturally would be those with high packet
traffic, which are looking for efficient throughput
technologies of high packet traffic, which will reduce the cost
of early deployment.

Does that mean you're looking for partnerships with
other operators around the world?
Hirata: It's not as extreme as "partner" —
maybe "partner" might be too strong a word. We are looking for
operators that share the same mindset, that are looking to
reduce cost from handset vendors, by increasing the number of
handsets while they ensure the right timing to deploy
commercial services.

Are you and they approaching handset companies
already, to start to talk about this policy?
Hirata: Yes, we have approached a number of vendors,
in terms of development at this stage of base stations and
handsets. NEC, Fujitsu and Panasonic are the vendors that we
are co-developing base stations with.
We are at the stage where our R&D team is effectively
pursuing both base station and handset development.

Until then how is DoCoMo competing in the market in
Japan? The company is facing strong competition now and DoCoMo
was the leader very early on. You want to maintain that
position: what is your strategy for doing that over the next
few years?
Hirata: That's a very difficult and challenging
question. Of course there's competition in handsets as well as
network configuration, as well as competition by price cutting.
In all elements we'd like to enhance the service level, to seek
better handsets as well as improve the quality and the
affordability.
As the number one operator our focus on strategy is as
important as new acquisition of subscribers — equally
important is the retention of our loyal base of existing
subscribers.

Has number portability changed the mix in Japan so
there is more competition — with people moving from
you to other operators and back again?
Hirata: We do not feel a large impact from users
migrating from us to operators that we compete with. This has
been less substantial and as time goes on there has been a
smaller number of ported out subscribers and as a result we are
not seeing a significant influence.
In effective terms, pricing competition has a greater impact.
For example, Softbank, the number three operator, has been
challenging by cutting prices. Though Softbank, by their
aggressive pricing strategy has earned — through
number portability — a greater number of new
subscribers, they have a smaller ARPU.
This is in fact demonstrates that you may increase your
subscriber base by discounting your pricing and tariffs.
However you will earn only a lower ARPU base of
subscribers.

Does that mean — because of price
competition — you have to reduce your costs? You have
a lot of fixed costs: how do you reduce the costs of the rest
of the operation?
Hirata: There are two major elements. We have started
to stop the subsidies that we provided as sales incentives for
handsets. Handset subsidies went too much to the extreme
— just before we ended our handset subsidies we had to
provide 37,000 yen of subsidies per handset sale on
average.
Last November we switched to a new handset sales model, and
handsets are now sold at a fixed price. In exchange for that
higher upfront cost the subscriber has to pay we provide a
discount on basic charges — and we believe that will
substantially reduce the sales cost.
In fact the second element is that we had eight regional sales
companies in DoCoMo. We are going to integrate these sales
companies — they had duplication in customer centres,
repair centres and so on, and we are trying to integrate them.
It reduces the sales cost and the maintenance cost.
Our competitors, several years back, already started to
integrate their formerly separated regional sales
companies.

Will that reduce the number of people employed by
the DoCoMo group — and by how much?
Hirata: As you know very well about Japanese
employment practices, they will be shifted or reallocated
— to the more demanding corporate sales front,
especially for the enrichment of corporate services.
This is because our activities related to corporate accounts
for sales and marketing has been enhanced. We see activity
rising for fixed-mobile convergence — so you can
follow your sales activity or your staff by using your handsets
internally as a corporate phone and outside as a mobile phone.
We are going to reallocate our staffing to the corporate side
of business development — and also in consulting and
providing proposals.

How many staff will that involve?
Hirata: If my memory is correct, of the order of
several thousand for the nationwide coverage of corporate
accounts.

Let's turn now to NTT DoCoMo's strategy outside
Japan. You used to have investments in Europe and elsewhere,
but your policy has shifted.
Hirata: Our main focus is in Asia and the Pacific. The
stepping stones that we will further exploit include roaming
and to further expand common services to corporate accounts.
What is slightly different is our equity capital investments
and seeking a certain return on the investments. We acknowledge
well that seeking returns on our equity investment is of course
very important. However beyond that we're trying to seek
returns on enriching our service line-up. This is because we're
investing as an operator.
We have already invested in a number of stakes in operators in
Asia. However, to our regret — with a very small
exception — our stakes have been minority stakes. Some
states still have foreign ownership restrictions which limit us
from majority stakeholding.

Are you saying that if there weren't those
restrictions you would like to have a majority stake in some
companies?
Hirata: Yes, we do have the intention to take majority
stakes if we are provided with the opportunity, with the
lifting of foreign ownership stake restrictions. In Guam and
Saipan we have a 100% equity stake, because they do not have
any restrictions. This is justified because of the number of
Japanese visitors — 1.3 million — to Guam and
Saipan. We want to provide the same services when our customers
travel to Guam and Saipan as they would enjoy in Japan.

Does that mean investment is largely to provide
services for your customers abroad, outside Japan, rather than
that you see growth opportunities for your services from the
local population? Does the local market come into the
calculation?
Hirata: Yes, 3G wideband CDMA services are just
starting in Asia — and we have invested to deepen our
support. This is also the right timing because we do see more
affordable handsets with dual mode capabilities — GSM
and WCDMA handsets coming to the market.

Does that give you more leverage with your
vendors?
Hirata: It is very challenging. We are trying to work
it two ways. We want to increase our influence on global
vendors, and secondly to increase the opportunities for
Japanese vendors to sell their handsets in the region where we
have invested.
We are trying to capture some parts of the Asian markets which
are more demanding in terms of handset functionality —
though in general Japanese handsets have relatively high
functionality. We do believe that in certain parts of Asia we
see a rising level of demand for more highly functional
handsets.

Which takes us to mobile television, in which you're
investing in Japan. It's still a very controversial area, and
some people are very sceptical about mobile TV.
Hirata: At the moment, though we have mobile TV
reception, it hasn't earned us revenue because we are
simulcasting digital terrestrial services. However it's become
a standard feature, because our subscribers are looking for
mobile TV-equipped handsets.
Japan still has restrictions on simulcasting, but we will see
the restriction end this year. We have invested already in
programmers for programming that will fit the size of mobile
handset screens.
We are already addressing the question of mobile TV production
by investing in a TV production studio and a film
producer.
What is the killer application for the handset size? What is
the content that we should be producing? We are trying to
produce applications, or content, or programming, that is not
currently provided by digital terrestrial broadcasters and will
create continuous viewing on handsets.

Will you solely do this with these investment
partners or are you considering replicating the model you had
for i-mode, of creating an ecosystem for content
producers?
Hirata: There are two separate things. Receiving
broadcasts on handsets is a regulated field and that is why we
are working with broadcasters and developing the
programming.
However communications is deregulated, and we have provided a
platform for mobile internet access via the i-mode platform.
The i-mode channels from content producers can be numerous,
unlimited.
There is a limited number of licensed broadcasters and
broadcasting spectrum is limited to carry the programming
— and therefore we are trying to serve the viewers by
producing the right content with programmers.
GTB

Have your say

All comments are subject to editorial review.
All fields are compulsory.